Biodiversity law requirement of NBA Approval for Indian herbal companies

The Earth’s biological resources are vital to humanity’s economic and social development, as well as for the maintenance of ecosystem health. Countries have long recognized that species, ecosystems, and biological diversity are of tremendous value to present and future generations. At the same time, the threat to species and ecosystems has never been greater. Species extinction caused by human activities continues at an alarming rate. For these reasons, countries have adopted a range of international treaties to protect species, habitats, and biological diversity itself.[1] India is one of the 17-mega biodiversity countries of the world. With only 2.4% of the land area, India already accounts for 7-8% of the recorded species of the world. Over 46,000 species of plants and 81,000 species of animals have been recorded in the country so far by the Botanical Survey of India and the Zoological Survey of India, respectively. India is an acknowledged centre of crop diversity, and harbors many wild relatives and breeds of domesticated animals and fish besides millions of microbial diversity, insects and other species. The ecosystem diversity of India is also unparalleled in comparison with other countries in the world.[2]

In India, the Biodiversity laws were brought into force by ‘The Biodiversity Act 2002’ to meet the obligations under Convention of Biological Diversity (CBD). This act, over a period, has become more crucial to most Indian companies involved in research or manufacturing of herbal compositions. The purpose of the Biodiversity Act is to realize equitable sharing of benefits arising out of the use of biological resources and associated knowledge. The main objectives of the Act are conservation, sustainable use and equitable benefit sharing out of the utilization of bio-resources. The Act also covers the protection of traditional knowledge and equitable sharing of benefits arising out of the use of such knowledge.[3] Under the provisions of the act, it necessitates that a person seeking to obtain Biological resources for research or commercial utilization may do so only upon receiving an approval from the National Biodiversity Authority (NBA) (Section 3 (1)). While the act provides that it is mandatory for a person to get an approval for obtaining Biological resources, the act also specifies that the person required to take approval is one having an association with atleast one foreign element (Section 3(2)). Now, for many Indian Companies the condition under Section 3 (2)is unclear, especially in light of the judgement in Ramdev’s Divya Pharmacy.

India with its readily accessible, plush biologically diverse resources, has always been a land of Ayurveda and Traditional Knowledge. For such a country, while Section 3 (2) would come as a well-accepted and justified clause since the clause specifically emphasizes that foreign companies are the ones required to obtain prior approval from the NBA, the recent judgement in Ramdev’s Divya Pharmacy paints a different picture.

In light of this judgement, it is mandatory for Indian companies as well to receive NBA approval for obtaining Biological resources for commercial use. Indian companies which were originally under the impression that a mere intimation to the NBA was sufficient as required under Section 7 of the act, are now under scrutiny by the Biodiversity Board.

Well, the answer to the question of why this approval is so crucial to the entire process is that it is the only way by which the NBA can impose a Fair and Equitable benefit sharing on anyone obtaining India’s Biological resources for commercial utilization. The Access and Benefit Sharing Agreement (ABSA) with the NBA which includes a Benefit sharing component levied by the NBA  is usually a percentage of the gross sales and is the only document through which an approval is provided. It is crucial that herbal formulation developers are aware that this ABS agreement is also a key requirement for obtaining patent rights on any herbal formulation (Section 6(1)). In other words, a patent application at the patent office will remain pending until this agreement/approval from the NBA is received.

While Section 3 of the act talks about legal requirements for the act of obtaining biological resources, Section 6 specifically defines the requirement for the act of obtaining IPR on inventions related to biological resources. Here, the point pondered upon by many is that Section 6(1) does not in its language differentiate between Indian and Foreign companies, whereas Section 3 clearly appears to be sensitive to a company’s nationality.

Ramdev’s Divya pharmacy which utilizes the country’s biological resources to produce ayurvedic formulations was earlier ordered by the Uttarakhand’s Biodiversity board to abide by the legal obligation of Fair and Equitable benefit sharing. However, Divya pharmacy filed a case in retaliation arguing that the requirements of benefit sharing would not be required as it is an Indian entity. However, the high court ruled against the company while stressing that the laws cannot be interpreted as sensitive to nationality and would be applicable to all herbal manufacturers including Indian research and manufacturing companies.

Well, the logic behind the fact that any innovator company, Indian or Foreign, has to receive an NBA approval for obtaining Patent rights may be justified for a reason that patent rights do offer exclusivity to a company over a product that may be using Biological resources or may even be inspired by Traditional knowledge of India. However, the case of Divya pharmacy has brought distress upon the Indian herbal manufacturers who, big or small, are making a living from manufacturing the generally known herbal formulations. By imposing the benefit sharing component on these manufacturers, the NBA is taking away the luxuries that the Indian companies thought they were entitled to due to their nationality.While, one may think that it’s unfair to impose benefit sharing on Indian companies as Indian companies are entitled to the Biodiversity that forms a part of their place of origin, it is suggested that herbal companies seek professional assistance in light of judgments such as that of Divya pharmacy.

Relevant sections:

Section 3

“Certain persons not to undertake Biodiversity related activities without approval of National Biodiversity Authority.—

(1) No person referred to in sub-section (2) shall without previous approval of the National Biodiversity Authority, obtain any biological resource occurring in India or knowledge associated thereto for research or for commercial utilisation or for bio-survey and bio-utilisation.

(2) The persons who shall be required to take the approval of the National Biodiversity Authority under sub-section (1) are the following, namely:—

(a) a person who is not a citizen of India;

(b) a citizen of India, who is a non-resident as defined in clause (30) of section 2 of the Income-tax Act, 1961 (43 of 1961);

(c) a body corporate, association or organisation—

(i) not incorporated or registered in India; or

(ii) incorporated or registered in India under any law for the time being in force which has any non-Indian participation in its share capital or management.

Section 6:

“ Application for intellectual property rights not to be made without approval of National Biodiversity Authority.—

(1) No person shall apply for any intellectual property right, by whatever name called, in or outside India for any invention based on any research or information on a biological resource obtained from India without obtaining the previous approval of the National Biodiversity Authority before making such application: Provided that if a person applies for a patent, permission of the National Biodiversity Authority may be obtained after the acceptance of the patent but before the sealing of the patent by the patent authority concerned: Provided further that the National Biodiversity Authority shall dispose of the application for permission made to it within a period of ninety days from the date of receipt thereof.

Authored by Supriya Ramacha
[3] ibid.

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